Why digital transformation?
Digital transformation is about creating and delivering new value in processes and systems, user experiences and business models that supports organizational vision. it is inevitable that digital transformation brings board changes or innovations across the globe and in multiple industries impacting small, medium and large enterprises. These sweeping changes can be viewed as new threats or opportunities.
When reflecting on the industrial revolution trends (to name a few, internet, automation, AI), the basic customer needs typically stays the same and industries (transportation, communication, banking, entertainment etc.) evolves with time. In the digital economy, what really changes is "how" customer needs are met. Uber for example, revolutionized transportation, leveraging technology innovation to connect riders and drivers. Netflix and Youtube transformed the entertainment world, Netflix made it possible for us to move away from hiring in-store DVDs to on-demand TV subscription model, now Netflix is producing movies based on customer preferences. Youtube enables people from all walks of life to create their own video content and share it with the world instantly, challenging the dynamics of video production. Organizations needs to ensure that great user experiences, internal or external are delivered in a more convenient and secure way to stay relevant. Organization, business and enterprise is regarded the same and will be used interchangeably throughout the blog. Let's look at some of the reasons why digital transformation is necessary and difficult?
1. User experience
Digital transformation improves user experience and makes it easier for people to connect around the world, work anywhere, anytime and enjoy the benefits of the modern connected life. User experience (UX) refers to the overall experience to users or customers delivered using a product or service such mobile application/website that is easy, convenient and attractive to use. Customer experience is top of mind for most organizations. This requires organizations to adopt a customer centric culture, produce products and services with customer needs in mind and changing how the business deliver value proposition to customers, for example, using omni-channel approach (store, phone, web, mobile, social) to ensure the overall experience is unified and consistent across customer journeys.
It is important for organisations to bridge the consumerisation of IT gap using digital workplace technologies, such as office 365, instant messaging, smart virtual assistant apps, cloud, mobile etc., to improve employee productivity. A happy and productive employee provides better customer satisfaction and in turn enhanced customer experience.
2. Business effectiveness
Digital transformation foster operational excellence and business effectiveness. To enable business or operational excellence, organizations should harness the power of data insights. Data is regarded as a lifeblood of many industries and in turn as a fuel for digital economies. Data-driven digital economy uses information and digital technologies such as cloud, big data analytics, AI, Internet of Things coupled with talent to create economic value for everyone.
Data driven strategies ensures alignment between customer and business needs. They enable businesses to use analytics to turn data into meaningful insights that improve operational excellence and business effectiveness through informed decision making and most importantly strengthened customer engagement. Most companies, including high tech companies like, Facebook uses data to target customers for marketing campaigns and to understand customer needs better in order to meet the evolving market demands. Supply chains are increasingly shifting to a demand-driven supply chain model. Using data and analytics, this model provides real-time information on demand and inventory levels to respective participants in the supply chain ecosystem, to enable them to react with agility when unforeseen circumstances arise.
3. Speed of change
Technological innovation is altering the norm, removing geographic barriers and fostering a connected and interdependent world. Alibaba for example used technology and internet to create an ecosystem using e-commerce platform that enables small businesses to promote and sell their products online regardless of their geographical location.
The rapid pace of technology introduces a lot of uncertainty in the market and current business environment is becoming more dynamic. Professor John P. Kotter in 1995 observed that the rate at which our world is changing is increasing but our ability to keep up with it is not. This is still true, technological innovations today are happening at an unprecedented rate disrupting many industries. Reflecting at what is happening around the world, for example, global politics, emerging trade wars, climate change and digital disruption, this suggests that we are increasingly living in a VUCA world. The VUCA world is more interconnected, interdependent, nonlinear and volatile. VUCA was taken from the military acronym and stands for volatility, uncertainty, complexity and ambiguity. It captures the uncertain and dynamic changing situation of the military engagement.
Traditional strategy methods are being challenged, more adaptive approaches are emerging. For example, strategic thinking across the organization is essential to deliver business goals and objectives in the VUCA world. Strategic thinking is not about a fixed plan. It allows the organisation, mainly the leadership team to adapt to changing circumstances, embrace improvisation and to respond decisively. Sometimes strategic thinking means recognizing the limits of the given strategy and being willing to come up with something new, perhaps better option or route to achieving business goals and objectives.
Digital transformation is constant change that permeates across the organization. It requires enterprise alignment between business and technology to deliver the organisation vision and strategy. Organisational transformation is not easy and takes longer due to internal and external factors. The internal factors may be culture, processes and systems, ways of working (structures) and operating model. CIO's are expected to sustain, grow the business and in some instances transform the entire organisation using digital technologies. This requires a digital first mindset, hence the emergence of CDO's. Digital transformation requires huge investments and can deliver great returns. IDC (2017) predicts that by end of 2019, digital transformation spending will reach $1.7 trillion worldwide, a 42% increase from 2017 and by 2019, all digitally transformed organisations will generate at least 45% of their revenue from Future of Commerce Business Models.
World Economic Forum (2017) says that "digital transformation is emerging as a key driver of sweeping change in the world around us. It has the potential to significantly improve consumer lives and create broader societal good, while providing businesses with the new opportunities for value creation and capture". Based on these three factors, every organization should embrace digital transformation to benefit from new opportunities and to rebuild their market position.